Nigerian Federal Government Resolves Fiscal Terms With Oil Firms

Federal Republic of Nigeria petroleum minister.
Originally uploaded by Pan-African News Wire File Photos

PIB: FG Resolves Fiscal Terms with Oil Firms

2010 bid round only for marginal fields

Nigeria ThisDay
By Ejiofor Alike, 08.06.2010

There is an indication that the Federal Government may have resolved the controversial provisions of the Petroleum Industry Bill (PIB) with the local and multinational oil companies operating in the country.

This indication emerged yesterday as the Special Adviser to the President on Petroleum, Dr. Emmanuel Egbogah, stated that the government had resolved all the contentious issues with the oil firms.

Egbogah also said the next oil licensing round may not be the usual bid round for oil blocks but the allocation of marginal oil fields.
Addressing journalists at the opening ceremony of the international conference of the Nigeria Council of the Society of Petroleum Engineers (SPE), in Abuja, the special adviser also said that the industry reform bill would be passed as soon as the National Assembly resumes legislative duties after their current break.

“There have been issues; they have been resolved to everyone’s satisfaction and if you are following the trend, I think a week ago, the Chairman of the Senate Committee on Upstream, Senator Lee Maeba, made a statement regarding the preparedness of the passage of the bill. They have finished all their work; they have done the harmonisation and I think that very soon – as soon as they come back from the recess, according to what he said – they will be able to have the bill passed,” he said.

Both local and multinational operators have opposed the amendment of the existing fiscal requirements in deepwater as provided in the reform bill, stressing that it would amount to “changing the goal post at the middle of the match.”

They insist that the amendment could hinder long term investment in the upstream oil industry.

The multinational oil majors are also opposed to Clause 421 (2) (iii) of the PIB, which provides for a royalty rate of 25 per cent as against the existing 20 per cent for production that exceeds 20,000 barrels per day for deep water operations.

The 25 per cent royalty provided for gas in deep water as against the existing 7 per cent royalty for production that exceeds 120 million cubic feet a day is also being challenged by the operators, who argue that the existing terms should be allowed to subsist until the contracts expire.

Reacting to the position of the government that the issues have been resolved, one of the operators told THISDAY that they were yet to see the amended copy of the bill.

“I cannot confirm that to you because we have not seen the bill. You know that there are many versions. We made our input to the legislature and we are yet to see the amended version,” he said.

On the next oil licensing round, Egbogah said: “I think the Honourable Minister has made statement in connection with that. I think that this year, there may not be the usual bid round for block allocations, but the Honourable Minister has said that there will be bid round for, may be, the allocation of marginal fields. The minister is working on that and I am sure that within days, she will make definitive announcement for the timing,” he said.

The implication of organising a marginal field round is that multinational oil companies will be excluded as only indigenous operators are awarded marginal fields.